How lenders decide how much you can borrow

When you take out a mortgage, lenders look at a number of things to work out how much you can borrow. These include your earnings and outgoings, the property value and your credit history. Whatever you borrow, you need to be sure you can afford the repayments.

Your earnings:

Lenders will offer to lend you an amount based on your earnings. They will normally want to see proof of your income and will also look at your regular outgoings. It's important to give your lender as much detail as you can about your earnings and outgoings so that you're offered a mortgage you can afford. You also need to remember to budget for the one-off costs of buying a property such as administration and solicitor fees and Stamp Duty.

The property value:

Your lender will arrange a valuation to check how much the property's worth. Most lenders will offer up to 90 or even 95 per cent of the valuation if they think you can afford it.

Your credit history:

Your lender will check your credit history and ask previous lenders or landlords for references. If your record shows you've had difficulty with loans or rent payments in the past, it may affect how much you can borrow.

Don't be put off if a lender refuses you a mortgage or offers you an expensive deal - it's still worth shopping around.